Correlation Between British American and Spotify Technology
Can any of the company-specific risk be diversified away by investing in both British American and Spotify Technology at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining British American and Spotify Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between British American Tobacco and Spotify Technology SA, you can compare the effects of market volatilities on British American and Spotify Technology and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in British American with a short position of Spotify Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and Spotify Technology.
Diversification Opportunities for British American and Spotify Technology
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between British and Spotify is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Spotify Technology SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spotify Technology and British American is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on British American Tobacco are associated (or correlated) with Spotify Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spotify Technology has no effect on the direction of British American i.e., British American and Spotify Technology go up and down completely randomly.
Pair Corralation between British American and Spotify Technology
Assuming the 90 days trading horizon British American Tobacco is expected to generate 0.83 times more return on investment than Spotify Technology. However, British American Tobacco is 1.21 times less risky than Spotify Technology. It trades about 0.09 of its potential returns per unit of risk. Spotify Technology SA is currently generating about 0.01 per unit of risk. If you would invest 4,282 in British American Tobacco on September 24, 2024 and sell it today you would earn a total of 130.00 from holding British American Tobacco or generate 3.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
British American Tobacco vs. Spotify Technology SA
Performance |
| Timeline |
| British American Tobacco |
| Spotify Technology |
British American and Spotify Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and Spotify Technology
The main advantage of trading using opposite British American and Spotify Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American position performs unexpectedly, Spotify Technology can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Spotify Technology will offset losses from the drop in Spotify Technology's long position.| British American vs. Altria Group | British American vs. Tesla Inc | British American vs. Costco Wholesale | British American vs. salesforce inc |
| Spotify Technology vs. G2D Investments | Spotify Technology vs. Brpr Corporate Offices | Spotify Technology vs. Tyson Foods | Spotify Technology vs. British American Tobacco |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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